Wednesday, December 02, 2009

WFP Scrutinized

Newspaper Examines

Convoluted Structure

At Working Families

By Henry J. SternDecember 2, 2009

City Hall, the newspaper, is in the midst of a five-part investigative series on the Working Families Party and the web of shadow organizations through which it operates as a political party, a lobbying firm, a non-profit charitable foundation, and a for-profit business serving candidates the WFP has endorsed.

The newspaper was founded in June 2006, with Edward-Isaac Dovere as editor. It is owned by Manhattan Media, a publisher of weekly community newspapers in New York City, whose president and CEO is Tom Allon. The printed edition of City Hall appears twice monthly, and its website, www.cityhallnews.com, changes daily, occasionally more frequently, to publish current news. You can reach the staff at editor@cityhallnews.com. Past editions are available on the website. Manhattan Media also publishes The Capitol, a monthly dealing with New York State government and politics. Their website is www.nycapitolnews.com

You can link to Part 1 of the City Hall series here, Part 2 over here, and Part 3 right here. There are two columns to come, Thursday and Friday.

The articles so far published in City Hall expose an interlocking network of organizations consisting of the same handful of people, who gain substantial advantage by the purely hypothetical division of their enterprise into multiple companies. The separate organizations are governed by different state and federal laws, and activities which are forbidden for one type of organization are permitted for others. In fact, the groups are the same, so the purpose of this convoluted structure appears to be to evade the prohibition of certain activities by certain types of organizations. For example, contributions to political parties are subject to specific limitations, while contributions to nonprofit foundations are not.

The Working Families Party has hired a well-regarded law firm, Skadden, Arps, Slate, Meagher and Flom, to look into their arrangements. Retired Chief Judge Judith S. Kaye of the Court of Appeals and Daniel Kurtz, former head of the Attorney General’s Charities Bureau, will oversee the inquiry. The firm should be aware that this is a matter in which there is significant public interest. Judge Kaye enjoys a fine reputation. Presumably she will act not as counsel for the Working Families Party, although it is they who have engaged her firm, but instead act on behalf of the general public interest in clean, honest elections with enforceable limitations on contributions in all forms, as well as full and complete disclosure of campaign receipts and expenditures.

An important question in this matter is not only whether the WFP structure is compliant with existing New York State and Federal laws, but also whether these operations comply with the spirit of the laws, which are intended to secure full disclosure and fair competition between political candidates and parties.

For example, American and foreign companies incorporate in the Cayman Islands to avoid paying taxes and complying with regulations applied in the United States to business corporations. That does not mean that the practice of offshoring one’s headquarters is ethical or tolerable.

One interesting fact published so far in the series is that George Soros appears to have donated at least $350,000 to the network. We cite City Hall:

"Some of the Fund’s financial supporters were the same as those for the Working Families Organization, including the biggest single named donation from 2006 (visible on a 'Donations by Deposit' form filed with the state attorney general’s office): $200,000 from the Open Society Institute of billionaire philanthropist George Soros, who also wrote a $150,000 personal check to the Working Families Organization that year. Those donations are far larger than the $94,200 limit that the Working Families Party is bound to hold to under state law."

Soros, born in 1930 in Budapest, is reported by Forbes to be worth $11 billion. His fortune is self-made, and based on speculation in the stock market and in foreign and U.S. currency. He is reported to have made a billion dollars in one day, September 6, 1992, by short-selling English currency before the Bank of English stopped fixing its exchange rate. For this achievement, the British press called him "The man who broke the Bank of England." Soros has been a prominent philanthropist, and a supporter of left-leaning parties around the world. He funded dissident movements in Soviet bloc countries, and promoted democracy after the captive nations were freed.

We will keep you up to date as the series continues. We will publish the reaction of the Working Families Party to the series, if there is any. We are curious whether the mainstream media will pick up the story, which appears to us to deserve wider coverage than it has so far received.